Russia: GDP held up better than expected despite Western sanctions

Russia’s Gross Domestic Product (GDP) contracted by 2.1% in 2022, weathering the impact of heavy Western sanctions better than expected following Moscow’s offensive in Ukraine, official statistics showed on Monday 20 February. “GDP fell by 2.1%” in 2022 compared to the previous year, the Statistics Agency (Rosstat) said in a statement. The Ministry of Economic Development said in September that it was counting on a contraction in GDP of 2.9%, while the Russian Central Bank expected in December that it would be “around -3%”.

And according to an estimate given on January 17 by Russian President Vladimir Putin, Russian GDP was to contract by 2.5% over the whole of 2022, a far cry from the apocalyptic forecasts envisaged last spring, in the wake of the Russian offensive on its Ukrainian neighbour. While many observers question the reliability of the figures put forward by the Russian authorities, due in particular to the opacity of a number of economic indicators since the start of the conflict in Ukraine, the Russian economy seems to have resisted the shock of Western sanctions.

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Towards positive growth in 2023?

At the end of January, the International Monetary Fund (IMF) had indicated in a report to expect “a more moderate economic contraction than expected in Russia in 2022 (estimated at –2.2% once morest –3.4% expected)”, while estimating that it should be “followed by slightly positive growth in 2023”. Rosstat’s statistics come on the eve of a much-awaited speech by Mr Putin in parliament, which will come three days before the first anniversary of the February 24, 2022, outbreak of the Russian offensive in Ukraine, which caused a rain of international sanctions once morest Russia.

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Inflation stabilized in January at almost 12% year on year in Russia, according to Rosstat, following having soared to a twenty-year high last April (17.8% year on year) in the wake of the first Western sanctions. Prices, already on the rise in Russia due to the post-pandemic Covid-19 recovery and soaring commodity prices, had seen a conflagration in the second quarter of 2022, in the weeks following the start of the military intervention. Russian in Ukraine. At the beginning of February, the Central Bank of Russia said it was counting on “annual inflation between 5 and 7% in 2023, to return to 4% in 2024”.